Direct Deposit is a fast and easy way to receive money into your account. It is also safer than losing or misplacing your check and forgetting to deposit it. This way, the money goes right into your account and you will not need to worry about it.
How long does it take to receive it, though? Here is everything you need to know about Direct Deposits.
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How Does Direct Deposit Work
Direct deposit allows an employer or entity to electronically transfer funds from their account to yours. The money is sent through the Automated Clearing House (ACH) network, which moves money between banks. This eliminates the hassle of waiting for a check to arrive in the mail and then having to go to the bank to deposit it.
Most employers find direct deposit more convenient because they can process the payroll faster. They also do not have to deal with issuing, signing, and mailing checks.
Not only does direct deposit work for getting your paycheck, but you can also get:
- Child support payments
- Federal and government benefits
- Investment-related dividends
- Retirement pension
- Social Security
- Tax refunds
How Long Does Direct Deposit Take?
The anticipation to receive your check is always big, but it takes time. The time frame depends on the entity issuing the funds. For example, if your employer uses payroll software to process your paycheck and send the transfer, they’ll set a pay date. That is the date you can expect to see funds in your bank account.
The payroll software will remind your employer to submit the direct deposit a few days before your pay date. Once the payment is submitted, the funds are transferred to your account on the pay date.
Is Direct Deposit Instant?
The process is much quicker than getting a check, but you might not be able to access your funds instantly. Sometimes you will be able to access the money the same day, other times it might not be until the next business day.
Advantages of Direct Deposit
Receiving your benefits or paycheck through direct deposit is very efficient and easier for your life. You won’t have to wait to get your check and then go to the bank to deposit it. There are also many more advantages like:
- The funds might be available sooner than if you deposited a check.
- Many banks let you split your direct deposit between more than one bank account so you can automatically grow your savings.
- Your bank might waive your account maintenance fee if you receive regular direct deposits.
- You don’t have to worry about check fraud or identity theft from a lost or stolen check.
- You won’t lose or misplace the funds as if they were cash.
- Employers save time and money on processing payroll and mailing checks.
How Do You Set Up Direct Deposit?
Direct deposit is fairly simple and generally requires these steps:
1. Request a direct deposit form
You can request a form from your employer or download one directly from your bank. Most of the time, your bank’s direct deposit form already includes the routing number and other information you may need.
Here is a list of links to direct deposit forms for some popular financial institutions:
If you receive federal benefits, you can download the federal direct deposit form from the U.S. General Services Administration (GSA).
2. Fill in the form
You will need the following information:
- Bank Routing number (9 digits)
- Account Number
- Social Security Number (not all banks ask for this)
Some banks may ask for a voided blank check to confirm the information you provided. If you use a large national bank, make sure the routing number matches your local branch. Some banks will have different routing numbers based on different states and types of transactions. The routing number can be found on your personal checks, bank statements, bank website or by contacting your bank.
Some forms will ask you how much money you would like deposited as a percentage or dollar amount. For example, you could request 50% of your paycheck go to your checking and 50% go to your savings account. Splitting your paycheck is a great way to save money!
3. Sign, date, and submit the form to your employer
Once you have completed the form, you will need to sign and date it. Then, submit it to your employer or direct deposit issuer. Keep a copy of the authorization form and follow up with your employer to confirm they have set it up.
How Long Does It Take for Direct Deposit To Take Effect?
It depends on how long your employer takes to process your request. It may be as little as one to two weeks or as long as several payroll cycles to take effect.
What Are Alternatives to Direct Deposit?
If you do not have a bank account, but still want to send and receive money similar to direct deposit, these are some alternatives:
- Paypal or Venmo: These systems let others send money directly to your account, which you can then withdraw at an ATM using your Paypal or Venmo card.
- Prepaid Debit Card: Your funds can be loaded onto a prepaid debit card, which you can use to pay for items or make withdrawals at an ATM.
Direct Deposits are a fast and easy way to receive your income or benefits. Sometimes it may take a little while to receive, but generally it is pretty fast. There is no need to go to the bank to deposit a check any longer. All you have to do is fill out a form one time, and you’ll receive your paychecks once your employer processes it!
For more information on banking, check out our bank guides right here on HMB!